Financial intermediary

Common types include commercial banks, investment banks, stockbrokers, insurance and pension funds, pooled investment funds, leasing companies, and stock exchanges.

The financial intermediary thus facilitates the indirect channeling of funds between, generically, lenders and borrowers.

[5] [9] The prevalence of these intermediaries, relative to disintermediated transactions, is explained in that specialist financial intermediaries ostensibly enjoy a cost advantage in offering financial services; this not only enables them to make profit, but also raises the overall efficiency of the economy.

[10] The hypothesis of financial intermediaries adopted by mainstream economics offers the following three major functions they are meant to perform: There are two essential advantages from using financial intermediaries: The cost advantages of using financial intermediaries include: Various disadvantages have also been noted in the context of climate finance and development finance institutions.

[7] These include a lack of transparency, inadequate attention to social and environmental concerns, and a failure to link directly to proven developmental impacts.